Warren Buffett and Charlie Munger on Risk and Probability

Warren Buffett's views on risk are well-known in the investing community. He believes that risk and return are closely related, and that investors should be willing to accept a higher level of risk in order to achieve higher returns.

Warren, CEO of Berkshire Hathaway and vice Chairman , Charlie Munger, well known because of their long term value investing.

Warren Buffet is an American billionaire, business man and worlds no.1 stock market value investor. He, away from wall street crowd, practiced his investing psychology in Omaha, Nebraska. He is also known as oracle of Omaha.

Charlie Munger, right hand of warren buffet , is vice chairman of Berkshire Hathaway. He is well known because of this rational thinking. He is author of must read business book " Poor Charlie's Almanack"

Goal of this channel is to provide you insights about value investing of different successful investors. Learn about how great investors invested in past and how they are investing now.

[Raging.Geekazoid]

The hammer/nail thing is totally relevant. Exponential functions are really easy to deal with mathematically, so the quants at LTCM assumed that risks tail off exponentially (which means quickly), but they don't. So now everyone in finance knows about "long tails" (or "fat tails", as Warren and Charlie said), and they don't mean animals or men's formal wear!

[zacharydutcher]

The wisdom here is focusing on unknown unknowns and doing it in a way that people take seriously without causing cognitive strain.

[rezaizad]

This guys own the business. The math wizards don't own shit. It's all other peoples money!

[sitrakaforler]

They make me think of the 2 old guys in hte muppet show

[MC-gjfg]

You never put all your eggs in one basket when the risk is existential no matter how favorable the odds appear, but at the same time putting a larger than normal bet on a position that's offering outsized favorable expected value is probably a good idea.

[gregorypapas]

If you risk what you have and need for what you don't have and don't need.... YOURE GONNA HAVE A BAD TIME

[Spash]

I am now curious what the other 5 pieces of artwork regarding financial history are... ?

[ndfpfln]

The techniques they criticize work within organizations that have completely mastered them, but that isn't us working from home without AI supercomputers.

[tahneetran]

IMO- Mr. Munger and Mr Buffet roll their eyes when people talk about Sigma and Fat Tails because it's more about the (margin calls) human greed behaviors.

[Xezlec]

Yeah it's always kind of blown my mind how often people speak of unknown things as normally distributed. If you ask them why they think it's normally distributed they just say well we don't know how it's distributed, and if you don't know how it's distributed, gaussian is a good guess. But then ask them how good a guess it is, and how wrong it could be, and what the distribution of that error is, and what the expected value of their loss is due to that error, obviously they have no clue and just sort of fall back on "I dunno, I just think it seems reasonable and a lot of people do it". Also known as the fool's position.

[theYoutubeHandle]

there is always a risk of car accident, but the risk is small enough you just have to do it. By warren Buffett logic, you should never get in a car because you don't want to end up in a car accident.

For example, warrent buffett keeps saying believe in america. Does that mean america economy can't collaps? It's just that the chance is very small. By his logic, he shouldn't invest at all.

[jimparsons]

If 'n it ain't broke, don't fix it? Sounds like?

[ericdcbrown]

"Go back to go": a Freudian "monopoly" reference 🤣.

On a serious note, being so Apple-heavy seems risky and driven by the incentive to move the needle with large purchases. It seems that the rest of the company can excel, but if Apple slumps, Berkshire will be flat at best. It has been the most profitable buy on a dollar basis. So wtf do I know?!

[Blackstar]

i need cash right now please give me it